The following is a discussion of the financial condition of the Company as of
August 31, 2021, and the results of operations comparing the three and six
months ended August 31, 2021 and 2020. It should be read in conjunction with the
financial statements and the notes thereto included elsewhere in this report and
in conjunction with the Annual Report on Form 10-K for the year ended
February 28, 2021.
Forward-Looking Statements
Certain matters discussed in this quarterly report, except for historical
information contained herein, may constitute "forward-looking statements" that
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those described in the forward-looking statements.
Forward-looking statements provide current expectations of future events based
on certain assumptions. These statements encompass information that does not
directly relate to any historical or current fact and often may be identified
with words such as "anticipates," "believes," "expects," "estimates," "intends,"
"plans," "projects" and other similar expressions. Management's expectations and
assumptions regarding Company operations and other future results are subject to
risks, uncertainties and other factors that could cause actual results to differ
materially from the anticipated results or other expectations expressed in the
forward-looking statements.
Introduction
The Company is primarily engaged as a research and development facility of drugs
currently being tested for the use in the treatment of cancer, and provides
consulting services. The Company's clinical trial initiated in April 2016 for
children and adults with Diffuse Intrinsic Pontine Glioma (DIPG) (protocol
"BT-55") is currently under full clinical hold.
On September 3, 2004, the FDA granted the Company's request for "orphan drug
designation" ("ODD") for the Company's Antineoplastons (A10 & AS2-1
Antineoplaston) for treatment of patients with brain stem glioma and, on
October 30, 2008, the FDA granted the Company's request for ODD for
Antineoplastons (A10 and AS2-1 Antineoplaston) for the treatment of gliomas.
On January 13, 2009, the Company announced that the Company had reached an
agreement with the FDA for the Company to move forward with a pivotal Phase III
clinical trial of combination Antineoplaston therapy plus radiation therapy in
patients with newly diagnosed diffuse, intrinsic brainstem gliomas ("DBSG"). The
agreement was made under the FDA's Special Protocol Assessment procedure,
meaning that the design and planned analysis of the Phase III study of
combination Antineoplastons A10 and AS2-1 plus radiation therapy ("RT") in
patients with newly-diagnosed, diffuse, intrinsic brainstem glioma (protocol
"BT-52"), are acceptable to support a regulatory submission seeking new drug
approval. However, the FDA placed a full clinical hold on IND 43,742 regarding
such Phase III clinical trial. Please see the section below entitled "Clinical
Hold on Phase II and Phase III Clinical Trials."
Clinical Hold on Phase II and Phase III Clinical Trials
In a letter dated June 25, 2012, the Company informed the FDA of a serious
adverse event in which a patient who was receiving Antineoplastons developed
grade 4 hypernatremia and subsequently died. The Antineoplaston-related
hypernatremia was categorized by the investigator as possibly related to the
study drug. Of the 2,297 patients who have received at least one dose of
Antineoplastons, the serious adverse events (SAEs) which have been experienced
are as follows: hemoglobin (grade 3: 0.13%; grade 4: 0.04%), extravasation
(grade 3: 0.04%), pain (grade 3: 0.04%), fatigue (grade 3: 0.09%; grade 4:
0.04%), fever (grade 3: 0.09%), injection site reaction (grade 3: 0.04%),
vomiting (grade 3: 0.09%), hypernatremia (grade 3: 0.09%; grade 4: 1.12%; grade
5: 0.26%), confusion (grade 3: 0.04%), seizure (grade 3: 0.04%), somnolence
(grade 3: 0.35%; grade 4: 0.04%), pain: head/headache (grade 3: 0.09%) and pain:
joint (grade 3: 0.04%).
On July 30, 2012, the FDA placed a partial clinical hold for enrollment of new
pediatric patients under single patient protocols or in any of the active Phase
II or Phase III studies under investigational new drug application 43,742. The
FDA imposed this partial clinical hold because, according to the FDA,
insufficient information had been submitted by the Company to allow the FDA to
determine whether the potential patient benefit justifies the potential risks of
treatment use, and that the potential risks are not unreasonable in the context
of the disease or condition to be treated. The FDA cited 21 C.F.R. §
312.42(b)(2)(i), 21 C.F.R. § 312.42(b)(1)(iv), and 21 C.F.R. § 312.42(b)(3)(i),
as grounds for imposition of a clinical hold; and 21 C.F.R. § 312.305(a)(2), a
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criteria for expanded access use. The FDA advised the Company that until it
resolved the matter to the FDA's satisfaction, the Company could not enroll new
pediatric patients in any protocol under such IND. The Company later notified
the FDA in a September 24, 2012 letter that it was closing pediatric protocol
BT-10 (under IND 43,742) for enrollment effective September 25, 2012, and that
it would also terminate the protocol once all active patients had completed the
study. As of February 17, 2015, all patients discontinued treatment under
protocol BT-10 and such protocol was closed as of March 10, 2015.
In a teleconference on January 9, 2013 between the FDA and the Company, followed
by a letter of the same date, the FDA notified the Company that the agency was
placing IND 43,742 on partial clinical hold, due to a lack of a complete
response to the issues raised by the FDA and what the FDA deemed a misleading,
erroneous, and incomplete investigator brochure. The FDA cited 21 C.F.R. §
312.42(b)(2)(i) and 21 C.F.R. § 312.42(b)(1)(iii), as grounds for imposition of
a clinical hold. The FDA further advised the Company that until it resolved the
matter to the FDA's satisfaction, that the Company could not enroll new adult or
pediatric patients in any protocol under such IND. The FDA also placed protocol
BT-52 on clinical hold due to what the FDA deemed to be an unreasonable and
significant risk of illness or injury to human subjects. The FDA cited 21 C.F.R.
§ 312.42(b)(2)(i) and 21 C.F.R.§ 312.42(B)(1)(i), as grounds for imposition of a
clinical hold. The FDA advised the Company that until it resolved the matter to
the FDA's satisfaction, the Company could not legally conduct the identified
clinical study under such IND. In a teleconference with the FDA on September 16,
2013 and pursuant to the Company's notification letter dated September 17, 2013,
the Company notified the FDA that the proposed Phase III protocol BT-54 had been
withdrawn from further consideration.
After several amendments to the IND which were reviewed by the FDA, the FDA
concluded that BT-52 can be initiated and the partial clinical hold was removed
by the FDA on June 20, 2014.
Additionally, the Company received IRB approval on February 4, 2015 for FDA
reviewed protocol BT-55 open label, Phase II study of Antineoplaston A10 and
AS2-1 in patients with a Diffuse Intrinsic Brainstem Glioma (DIPG) in five
treatment groups based on patients age and prior treatment.
On April 20, 2016, the Company received a full clinical hold letter from the FDA
based on FDA's inspection of S.R. Burzynski's manufacturing facility in
March 2015. On April 27, 2016, the Company requested to change the full clinical
hold to partial clinical hold to allow patient #1 to continue the Antineoplaston
treatment according to protocol BT-55, since the patient was enrolled before the
full clinical hold was imposed. Based on the FDA's position regarding the
Company's request on April 27, 2016 and the Company's teleconference with the
FDA on May 3, 2016, the Company removed patient #1 from the study.
A temporary restraining order from the US District Court of Rhode Island allowed
the resumption of patient #1's Antineoplaston therapy on May 17, 2016. As a
result of such temporary restraining order, a subsequent letter from the FDA
dated May 26, 2016 informed the Company that the full clinical hold was replaced
and a partial clinical hold was imposed. As a result, patient #1 restarted
treatment under IND 43742.
On June 14, 2016, the FDA issued a letter to the Company in connection with the
FDA's inspection of S.R. Burzynski's manufacturing facility (the "SRB
Manufacturing") in March 2015. The SRB Manufacturing addressed the issues raised
in the letter in a response letter submitted to the FDA on July 5, 2016 and in
subsequent letters.
On February 20, 2017, BRI informed the FDA of the death of patient #1 on
February 19, 2017. No new patients can be enrolled to protocol BT-55 or BT-52
until the partial hold on IND 43742 is lifted. On August 24, 2017, the FDA
imposed a full clinical hold on IND 43742 until deficiencies regarding the SRB
Manufacturing are resolved.
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Complaint Filed by the Texas Medical Board Against Dr. Burzynski
On March 3, 2017, the Texas Medical Board issued their final ruling regarding
the complaint filed on December 11, 2013 and subsequently amended in July 2014
and November 2014, against Dr. Stanislaw R. Burzynski, who serves as our
President and the Chairman of our Board of Directors. The Texas Medical Board
made allegations that Dr. Burzynski had acted unprofessionally and failed to
meet standards of care under the state's Medical Practice Act. In the final
ruling, the Texas Medical Board found that Dr. Burzynski was subject to sanction
for various failures that included supervision of foreign medical graduates,
untimely and insufficient informed consent, medical record support
documentation, tumor measurement reporting inaccuracy, and lack of disclosure of
ownership interest in a pharmacy. As a result, Dr. Burzynski was reprimanded.
His Texas license was suspended for five years but that suspension was stayed
and he was placed under probation under terms and conditions that include having
billing practice monitored by a billing monitor for 12 consecutive monitoring
cycles, enrolling and completing a physicians education program ethics course,
following informed consent protocol, passing the Medical Jurisprudence
Examination, and compliance with the Medical Practice Act and other statutes
regulating Dr. Burzynski's practice. As requested as part of the terms and
conditions, Dr. Burzynski has completed payment of an administrative penalty and
restitution, submission of all informed consent forms for review, submission of
an ownership interest disclosure form for review, and he has completed
continuing medical education. The Company does not believe that the final order
will have an adverse impact on current activities at the Burzynski clinic.
However, if any outcomes or changes arise relating to similar matters or future
allegations, this could result in substantial harm to the Company's business and
operations.
Termination of License Agreement
Pursuant to the terms of the License Agreement dated June 29, 1983, as
superseded by an Amended License Agreement dated April 24, 1989 and a Second
Amended License Agreement dated March 1, 1990 between the Company and
Dr. Burzynski (collectively, the "License Agreement"), the License Agreement
terminated on July 2, 2019 upon the expiration of the last patent licensed to
the Company from Dr. Burzynski. As of July 2, 2019, all patents previously
licensed by the Company under the License Agreement have expired.
Results of Operations
Three Months Ended August 31, 2021 Compared to Three Months Ended August 31,
2020
Research and development costs were approximately $186,000 and $249,000 for the
three months ended August 31, 2021 and 2020, respectively. The decrease of
$63,000 or 25% was due to a decrease in materials costs of $1,000, personnel
costs of $22,000, facility and equipment costs of $13,000, and consulting and
quality control costs of $27,000, as a result of a reduction of requirements
imposed by the Food and Drug Administration.
General and administrative expenses were approximately $38,000 and $79,000 for
the three months ended August 31, 2021 and 2020, respectively. The decrease of
$41,000 or 52% was due to a decrease in legal and other professional costs of
$31,000 and other general and administrative expenses of $10,000 as a result of
a reduction in requests from regulatory agencies.
The Company had net losses of approximately $225,000 and $329,000 for the three
months ended August 31, 2021 and 2020, respectively. The decrease in the net
loss from 2020 to 2021 is primarily due to an overall decrease in research and
development costs and general and administrative expenses of the Company as
described above.
Six Months Ended August 31, 2021 Compared to Six Months Ended August 31, 2020
Research and development costs were approximately $418,000 and $589,000 for the
six months ended August 31, 2021 and 2020, respectively. The decrease of
$171,000 or 29% was due to a decrease in material costs of $10,000, consulting
and quality control costs of $50,000, other research and development costs of
$3,000, personnel costs of $57,000, and facility and equipment costs of $51,000,
as a reduction of requirements imposed by the Food and Drug Administration.
General and administrative expenses were approximately $123,000 and $197,000 for
the six months ended August 31, 2021 and 2020, respectively. The decrease of
$75,000 or 38% was due to a decrease in other general and administrative
expenses of $25,000 and legal and professional fees of $50,000, as a result of a
reduction of requests from regulatory agencies.
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The Company had net losses of approximately $541,000 and $787,000 for the six
months ended August 31, 2021 and 2020, respectively. The decrease in the net
loss from 2020 to 2021 is primarily due to an overall decrease in research and
development costs and general and administrative expenses of the Company as
described above.
Liquidity and Capital Resources
The Company's operations have been funded entirely by contributions from
Dr. Burzynski and from funds generated from Dr. Burzynski's medical practice.
Effective March 1, 1997, the Company entered into a Research Funding Agreement
with Dr. Burzynski (the "Research Funding Agreement"), pursuant to which the
Company agreed to undertake all scientific research in connection with the
development of new or improved Antineoplastons for the treatment of cancer and
Dr. Burzynski agreed to fund the Company's Antineoplaston research for that
purpose. Under the Research Funding Agreement, the Company hires such personnel
as is required to conduct Antineoplaston research, and Dr. Burzynski funds the
Company's research expenses, including expenses to conduct the clinical trials.
Dr. Burzynski also provides the Company laboratory and research space as needed
to conduct the Company's research activities. The Research Funding Agreement
also provides that Dr. Burzynski may fulfill his funding obligations in part by
providing the Company such administrative support as is necessary for the
Company to manage its business. Dr. Burzynski pays the full amount of the
Company's monthly and annual budget of expenses for the operation of the
Company, together with other unanticipated but necessary expenses which the
Company incurs.
The amounts which Dr. Burzynski is obligated to pay under the agreement shall be
reduced dollar for dollar by the following: (1) any income which the Company
receives for services provided to other companies for research and/or
development of other products, less such identifiable marginal or additional
expenses necessary to produce such income, or (2) the net proceeds of any stock
offering or private placement which the Company receives during the term of the
agreement up to a maximum of $1,000,000 in a given Company fiscal year.
The Research Funding Agreement, as amended, contains an annual automatic renewal
provision providing for an additional one-year term, unless one party notifies
the other party at least thirty days prior to the expiration of the then current
term of the agreement of its intention not to renew the agreement. Subject to
the foregoing, the term of the Research Funding Agreement was renewed and
extended until February 28, 2022. It is expected that the Research Funding
Agreement will continue to renew each year prospectively unless terminated under
the provisions of the agreement.
The Research Funding Agreement automatically terminates in the event that
Dr. Burzynski owns less than fifty percent of the outstanding shares of the
Company, or is removed as President and/or Chairman of the Board of the Company,
unless Dr. Burzynski notifies the Company in writing of his intention to
continue the agreement notwithstanding this automatic termination provision.
The Company estimates that it will spend approximately $600,000 during the
remaining two quarters of the fiscal year ending February 28, 2022. While the
Company anticipates that Dr. Burzynski will continue to fund the Company's
research and FDA- related costs, there is no assurance that Dr. Burzynski will
be able to continue to fund the Company's operations pursuant to the Research
Funding Agreement or otherwise. In addition, Dr. Burzynski's medical practice
has successfully funded the Company's research activities over the last 25 years
and, in 1997, his medical practice was expanded to include traditional cancer
treatment options such as chemotherapy, gene-targeted therapy, immunotherapy and
hormonal therapy.
Because the Company currently is entirely dependent upon the contributions for
research provided by Dr. Burzynski under the Research Funding Agreement, the
Company would not be able to continue conducting its clinical trials if
Dr. Burzynski ceased funding the Company's research. In such event, the Company
would be required to find immediate funding which may not be available on
acceptable terms or at all. If this were to occur and the Company were not able
to find adequate sources of funding, the Company would be required to cease
operations. Even with Dr. Burzynski's continued contributions under the Research
Funding Agreement, the Company may be required to seek additional capital
through equity or debt financing or the sale of assets until the Company's
operating revenues are sufficient to cover operating costs and provide positive
cash flow; however, there can be no assurance that the Company will be able to
raise such additional capital on acceptable terms to the Company. In addition,
there can be no assurance that the Company will ever achieve positive operating
cash flow.
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